BALTIMORE, MARYLAND OFFICE MARKET
Gregory P. Crum
Currently
in Baltimore's office market, the lease-up of new space is
slowing compared with past years, according to Gregory Crum,
principal with Trammell Crow Co. Rental rate growth is easing,
especially in markets with multiple, competing new projects.
"Looking beyond 2001, we see new development in the suburbs
leveling off primarily due to the dwindling number of well
located sites coupled with the potential for an excess of
supply brought about by overly optimistic expectations of
continued demand," Crum says. "Of course, this picture
could dramatically change in the event the economy makes a
strong rebound."
Approximately 2.7 million square feet of new office space hit the Baltimore
metropolitan market in 2000, with approximately 6 million square feet
of new product slated to deliver in 2001. The majority of this new development
is speculative with approximately 22 percent already being pre-leased.
Most significant of the new development is the 3 million square feet of
new office space, says Crum.
There are several new Class A office towers proposed for Baltimore City,
where there has been no new central business district development in over
10 years. While most remain conceptual in design, the Lockwood Place project,
which is being developed and leased by Trammell Crow Co., is a 12-story,
257,504-square-foot office building with both retail and parking garage
components, slated to deliver as early as 2002. Major tenant Sylvan Learning
Systems has driven significant development in the Inner Harbor East area
of Baltimore City, taking nearly 225,000 square feet over the past several
years.
"Also significant to Baltimore City are the adaptive re-use projects
where antiquated industrial properties have been renovated and converted
to office properties, often becoming home to technology and telecom firms
and other creative industries," Crum notes. The former Procter & Gamble
detergent manufacturing facility has been converted to some 400,000 square
feet of office space. Thus far, Advertising.com has committed to a lease
for 99,000 square feet. The Tide Point Corporation has leased 80,000 square
feet there as well. The American Can Company site, an office and retail
complex in Baltimore's Canton area, is another example of a successful
re-adaptive use project, spearheaded in part by developer Streuver Bros.
Eccles & Rouse.
Other new office developments in Baltimore County include Timonium Two,
which delivered in July of 2000 and is already 57 percent leased. The
University of Maryland at Baltimore County recently broke ground on a
new building at its technology park, bwtech@UMBC. Five buildings are planned
for the UMBC Catonsville campus that will be geared toward for-profit
technology companies, with the first pre-lease already inked by Latitude360
for the entire first building.
Also under development by Trammell Crow Co. are Lyndwood Executive Center
and Montpelier Research Park, both located in Howard County. Lyndwood,
which is a two-building, 158,900-square-foot speculative office development,
offers relief to the space-crunched Columbia business community. Montpelier
Research Park, a five-building, 304,285-square-foot office/ flex development,
is being marketed toward the growing tech community in Howard County.
Building I in Montpelier is fully leased to Verizon Wireless, while four
additional buildings are under construction with expected delivery this
summer.
The lion's share of this new office development in 2000 occurred in the
Howard County market where a pro-business government and strong demand
from technology companies fueled developers such as Abrams Development,
Merritt Properties and Nottingham Properties to deliver new speculative
projects in Columbia, Crum says. Corporate Office Properties Trust was
especially active in northern Anne Arundel County, delivering two new
buildings in the National Business Park.
Major growth tenants in the Baltimore Metropolitan area are Corvis Corporation
(Howard County), CIENA Corporation (Anne Arundel County) and Sylvan Learning
Systems (Baltimore City & County). Over the past several years these tenants
have absorbed 340,000 square feet, 380,000 square feet and 225,000 square
feet of space, respectively.
The Citifinancial lease that closed at the very end of 2000 was arguably
the largest office lease transaction to occur in Baltimore City last year.
Trammell Crow Co. represented the landlord, Zurich U.S., in its lease
of the 265,000-square-foot building located at 300 St. Paul Pl. in Baltimore
to Citifinancial for a 15-year term. This lease renewal and expansion
effectively leased the building in its entirety.
Baltimore's Class A rental rates vary from $21 to $31 per square foot.
Class A vacancy rates vary from 11.27 percent in Baltimore County to 7.55
percent in Howard County. Baltimore City's rental rates remain in the
single digits at 7.85 percent.
Baltimore County's Owings Mills submarket will continue to see growth
as there still exists available land for office development, while Howard
County's Columbia South and BWI Airport submarkets will experience growth
as the Columbia Town submarket is nearly built-out to capacity, says Crum.
"The success of the development business in Baltimore is evidenced by
the 80 percent occupancy of the new product delivered in 2000," he adds.
"This high occupancy is a result of significant pre-leasing that resulted
from strong demand for new product in the desirable areas of Howard and
Anne Arundel Counties."
Gregory P. Crum is principal with Trammell Crow Company.
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